April 15, 2011

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Jillian’s is set to relinquish the ground floor of its building in downtown Indianapolis to another restaurant and bar, but the entertainment complex will continue to operate its arcade, pool hall and bowling alley on the second and third floors.

Locally based FB&F Entertainment LLC, which operates the Jillian’s restaurant and entertainment complex at 141 S. Meridian St., agreed to give up the space as part of a tentative agreement with landlord SMC Retail LLC.

Final details of the settlement, hammered out during a conference call Friday morning, could be signed off on by Wednesday.

FB&F is attempting to reorganize under Chapter 11 bankruptcy protection. As part of the case, landlord SMC filed a motion in April seeking to evict Jillian's over what it said was $697,237.25 in unpaid bills. Monthly rent, which is $52,000, had not been paid since June 2010, SMC alleged.

SMC terminated Jillian’s lease on March 15, but the firm is expected to amend it as part of the new agreement.

The settlement calls for Jillian’s to occupy the second and third floors, with SMC constructing a new entry to give patrons access from the street.

An unidentified restaurant and bar, which is set to sign a lease with SMC by Sept. 1, will take over the first floor space. In turn, the new tenant has agreed to purchase Jillian’s kitchen equipment and provide food service for patrons on the second and third floors, said Jim Knauer, the attorney for the FB&F ownership.

Jillian’s now occupies about 44,800 square feet of space, with a restaurant and sports bar on the ground floor and recreational activities on the upper floors. It will occupy roughly 34,000 square feet once it vacates the ground floor.

“[Jillian’s is] going to focus on what they do best,” said Knauer, of the local firm Kroger Gardis & Regas LLP. “The [restaurant] concept was a good one, and it worked for a lot of years. But the games and the bowling, and everything else, was their focus.”

SMC’s lawyer, Ben Caughey of Ice Miller LLP, told U.S. Bankruptcy Court Judge Basil Lorch III on Friday that his client needs to obtain possession of the first floor as quickly as possible.

“That allows us to reach an agreement with a new tenant,” he said. “The goal is a simultaneous closing [of the old lease] and a new lease with a new tenant.”

In addition, FB&F has agreed to pay SMC a total of $610,000 in three installments, from Oct. 31 to Feb. 15. Roughly $500,000 should be collected from at least two entities that plan to use Jillian’s to host Super Bowl events. Super Bowl XLVI is scheduled to be played at Lucas Oil Stadium on Feb. 5.

“We had a lot of issues we had to resolve in the process that would have been very expensive to litigate,” Knauer said, so a deal was struck.

The local Jillian’s opened in 1998 and was part of a rush of restaurants that arrived downtown following the opening of Circle Centre mall.

The business is operated by Craig Kastle and David Wallace, and is separate from 11 other Jillian’s restaurants operated by Greg Stevens in Louisville. The three have at least 25 years of experience in the food and beverage industry, according to the FB&F website.

The restaurant chain first encountered financial troubles in 2004, when the former Jillian’s Entertainment Holdings Inc., also in Louisville, filed for Chapter 11 bankruptcy.

Dallas-based Dave & Buster’s Inc. bought the nine largest units of Jillian’s for $27.5 million. Separately, Gemini Investors III, a Boston investment company, agreed to pay $10.9 million for 19 other Jillian’s, leaving what was then a 35-unit chain with seven remaining locations up for grabs.

The closing of Jillian’s restaurant operations would be the latest in a spate of local restaurants that have shut down within the past month. They include Hue and Zing downtown, as well as the Barley Island Brewing Co. in Broad Ripple and The Glass Chimney in Carmel.

Todd Maurer, the registered agent for landlord SMC, co-owns Newmark Knight Frank Halakar, a local commercial real estate firm. He is the son of Michael S. Maurer, who co-owns IBJ Media.

Maurer’s commercial real estate firm developed Six Over Meridian, a condominium project in the same building as Jillian’s.

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